Mitchell, inc., is expected to maintain a constant 6.05 percent growth rate in its dividends, indefinitely. if the company has a dividend yield of 4.55 percent, what is the required return on the company’s stock? (do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e. g., 32.16.) required return %

Required Return = 10.60%

Explanation:

If there is no dividend and stock price in a question, then we have to calculate it from the required return's point of view.

The required return of a stock is the combination of two parts - dividend yield and a capital gain of dividend yield.

Therefore, the formula is,

The required return of the stock = Capital gains yield + dividend yield

Here, the dividends growth rate is the capital gains yield, therefore,

Required return of the stock = 6.05% + 4.55%

The required return of the stock = 10.60%

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